When a customer sells their house, they might have to sign an exclusive contract with a real estate agent. This exclusive contract means that the seller agrees only to work with this one particular real estate agent while trying to sell their house.
A common misconception about exclusive agreements is that it will hurt your chances of selling your home and finding an agent who will work more effectively for you.
However, exclusive contracts can be helpful because they allow sellers and buyers to establish long-term relationships without distractions from other agents who might call asking if they can list the house.
But such helpful information on exclusive contracts with real estate agents is scarce, which fuels misconceptions among buyers and sellers of real estate property.
This article looks at all you need to know about a real estate exclusive contract with a realtor.
An exclusive contract with a real estate agent limits the seller and buyer’s rights to engage with other realtors while under contract.
The exclusive agent has an exclusive agency, or exclusive right to sell, for their client, which is defined in the exclusive listing agreement.
This means the agent will receive compensation for selling your property instead of receiving a commission from both you and an interested purchaser.
Types of Real Estate Agent Listing Agreements
There are three common types of real estate agent listing agreements. These are an exclusive agency, exclusive right-to-sell, and open listing agreements.
1. Exclusive Right-To-Sell Listing
Under an exclusive contract, the agent has the rights to sell the house without your consent. You cannot sign another agreement with another agent or buyer while under this exclusive contract.
2. Exclusive Agency Listing
With an exclusive agency listing agreement, the seller is represented by a broker but still reserves the right to sell his or her property.
There can be multiple agents to help the seller but only the agent that provides the best offer gets the commission.
This agreement works for those who want to be hands-on in the process but also don’t mind having others around to help.
3. Open Listing
This is a non-exclusive type of listing agreement, which means the sellers are not represented by any real estate broker and they reserve the right to sell their properties.
But similar to an exclusive agency listing agreement, there can be multiple agents competing to procure the ideal buyer. Whoever brings the offer for the highest amount will get the commission.
Who can sign an Exclusive Agreement?
You can sign an exclusive contract with a real estate agent or broker, but it has to be mutually agreed upon by all parties involved.
Both you and the exclusive agent must agree on the terms before entering into such an exclusive arrangement. If either party violates this exclusive agreement, then they will have to pay damages in civil court.
The best thing about getting an exclusive listing in real estate is that you have only one contact person throughout the selling process.
This minimizes facing inconveniences and conflicting ideas that may arise from listing your house with multiple agents.
Why would you want to sign an Exclusive Agreement?
An exclusive agreement is not ideal for every house seller because it limits the number of people to help you sell your home.
However, signing an exclusive agreement with a real estate agent can be helpful if you want to find a reputable buyer quickly and settle on a price without wasting time.
Plus, this exclusive contract helps agents understand that they are the only ones working for you while trying to sell your property.
This contract also makes it easier for them to know what they should do instead of wasting time asking about contractual obligations when listing your property for sale.
There are many benefits to exclusive listings in real estate. Here are some of the top reasons you should get an exclusive listing with a realtor when selling your property.
Benefits for a Seller
A seller benefits from exclusive listings by having the exclusive agent market and advertise their property. Exclusive agents typically offer more exposure for your home through open houses, lockboxes, exclusive mailings to targeted buyers, online advertising, etc.
This increased exposure can lead to better property marketing, leading to higher offers and ultimately selling your house for a better price.
The exclusive agent also has direct access to the local MLS (multiple listing service) where real estate agents share all their listings in an organized fashion with each other.
An exclusive agent will ensure that your property shows up on the list, which gives you maximum exposure when trying to sell a house.
An exclusive contract also gives you peace of mind, knowing that your agent is focused on the exclusive task of selling your home.
It also makes it easier to terminate an exclusive agreement if you find another real estate agent who can sell your house more effectively.
Benefits for a Buyer
A buyer benefits from exclusive listings by having exclusive access to exclusive properties not listed on the MLS (multiple listing system) and, therefore, not accessible to other agents and buyers.
These exclusive listings typically offer a competitive advantage because exclusive properties may be priced lower than homes listed on the multiple listing service.
Exclusive listings might also represent properties that would otherwise be sold before they were ever advertised publicly or sold privately without using an agent at all.
This means exclusive listings can provide a valuable opportunity for buyers to get a great deal on a home that might not be listed publicly.
What does an Exclusive Listing mean for real estate agents?
Some real estate agents do not believe exclusive contracts are beneficial because they limit exposure for the property and cut down the pool of prospective buyers to choose from.
However, exclusive listings can benefit both sellers and buyers if their agent is experienced, responsive, and actively works to market the property for sale.
Real estate agents typically receive exclusive listings based on the level of service they provide compared to other realtors in the area and their familiarity with marketing exclusive listings and establishing long-term relationships with their clients.
It may also mean that your exclusive listing is marketed differently than those where exclusive agents have not worked together in the past.
But this varies heavily from one real estate agent to another, so it is important to ask your exclusive listing realtor about their marketing plan for your exclusive listing.
Is it unethical to sign an Exclusive Contract?
Some homeowners claim that exclusive contracts are unethical because there might be better offers than what the exclusive agent finds.
However, exclusive agents must conduct business ethically and exercise reasonable skill and care when marketing exclusive listings.
Exclusive agents must also provide you with written notice of any offers that might be made on your exclusive listing.
The exclusive contract often includes a clause that specifies how much time an exclusive agent has to market the exclusive listing by showing it to other real estate brokers or selling it directly themselves.
After that period is up for reaching a legitimate offer, most exclusive contracts allow the seller to terminate the agreement if no legitimate offer has been reached.
They then list their property with another agent to quickly sell their home without needing to wait for yet another exclusive agreement.
Do I need a Lawyer to sign an Exclusive Listing Agreement?
No, exclusive listing agreements are standard forms that you can quickly review and sign yourself. A real estate agent will have the exclusive listing agreement that they use with all exclusive listings, so it would be easy to reuse that contract for a similar listing type in the future.
However, one thing to keep in mind is that exclusive contracts often contain a clause that requires you to pay your exclusive agent’s commission even if they are unable to sell your property or reach an agreement about ending the exclusive agreement.
This might not sound like something you want, but exclusive agents typically market their properties aggressively because they do not have other clients at this point.
This means exclusive agents are more likely to find offers quickly for you rather than working with your home for an extended period.
What to do before signing an Exclusive Listing Agreement
Exclusive agents usually work on exclusive listings long-term, so it is important to ask how much time they think they need to sell your property.
If you feel like the agent you are interviewing needs only a few weeks or months to find you an offer, they might not be suitable for your exclusive listing.
Exclusive listings are more likely to remain exclusive if exclusive agents have the time they need to market them instead of trying to rush through several exclusive listing agreements to bring in new clients and earn commissions as quickly as possible.
However, some homeowners who signed exclusive contracts but then received several offers within a few months might feel that exclusive agents have too much control over when the exclusive listing agreement expires.
If you find yourself in this situation, it is important to discuss your concerns about exclusive listings with your exclusive agent to ensure a mutual understanding of what is expected.
What happens if I decide to cancel?
If you decide that exclusive listing is not for you and you want to cancel the agreement with your agent, there are provisions in place for that.
But if your exclusive agent has been marketing and showing your property, they may be entitled to compensation for their efforts.
Your real estate agent will be able to advise you on this matter if they believe it applies to the current exclusive contract with your house.
How to negotiate for a buyer's agent agreement
If you are an exclusive listing, be sure to work with a real estate agent who understands the value of exclusive listings and how they should be marketed.
It will prove valuable, especially if your listing has special features or amenities that other homes for sale might not have.
You should also discuss the marketing plan for your exclusive property to understand what levels of exposure it will receive compared to properties listed on the multiple listing service (MLS).
Be sure that if you choose an exclusive agreement with a real estate agent, it still allows access to MLS to any agents who may buy your house in the future.
This means exclusive listings may be less effective in the long run, depending on how many exclusive agreements your agent has with their buyers.
There are also some questions to consider before choosing an exclusive agreement with a real estate agent who will be able to advise you better when it comes to marketing your home for sale.
An exclusive contract with a real estate agent can benefit both sellers and buyers from exclusivity during negotiations, showing potentials, disclosures, etc. However, exclusive listings do come with some limitations, making them less favorable for some sellers.
The benefits of exclusive listing agreement vary based on location, the exclusive listing agency, and individual circumstances. This explains why exclusive listings are not currently required under federal law.
However, some states, including California, have laws requiring exclusive agreements and enforcing penalties for those who violate exclusive contract rules.
This means that it is important to check state rules before agreeing to an exclusive right to sell agreement or exclusive listing with a real estate agent.